Citation NR: 9727804
Decision Date: 08/11/97 Archive Date: 08/19/97
DOCKET NO. 96-19420 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in St.
Petersburg, Florida
THE ISSUE
Entitlement to waiver of recovery of an overpayment of
improved pension benefits in the calculated amount of $8,786,
to include whether the overpayment was properly created.
REPRESENTATION
Appellant represented by: The American Legion
WITNESS AT HEARING ON APPEAL
Appellant
ATTORNEY FOR THE BOARD
K. Hudson, Counsel
REMAND
The veteran had active service from May 1945 to August 1946.
This matter comes before the Board of Veterans' Appeals
(Board) on appeal from a regional office (RO) decision of the
Committee on Waivers and Compromises (Committee) dated in
June 1994, which denied waiver of recovery of an overpayment
in the calculated amount of $8,786 on the basis that bad
faith had been shown in the creation of the overpayment,
thereby precluding waiver.
According to the record, the overpayment at issue was created
when the RO learned, in September 1993, that the veteran had
received a lump-sum insurance settlement of $20,132 the
previous year, and that he had been in receipt of Social
Security benefits for the past couple of years. The veteran
has argued that the $20,132 should not be counted as income,
and that, in any event, he was unaware that it was countable
income; consequently, he did not act in bad faith. The
question of whether the debt was properly created is implicit
in the issue of waiver of recovery of the overpayment, and,
thus, is inextricably intertwined with the certified issue.
See Schaper v. Derwinski, 1 Vet.App. 430 (1990). The veteran
was also in receipt of Social Security benefits; at a hearing
in September 1995, he reported that he began receiving Social
Security benefits in May 1992, which was prior to his June
1992 application for pension benefits, in which he
specifically reported that he was not receiving Social
Security benefits. Falsely reporting that he was not in
receipt of Social Security benefits which he was in fact
receiving is, in our view, a different matter than failing to
report income from an insurance settlement which the veteran
claims to have believed was not countable income. Moreover,
according to the veteran, the insurance settlement was the
result of an automobile accident, and income received in
connection with personal injury is only counted to the extent
that it exceeds medical, legal, and other associated
expenses. 38 C.F.R. § 3.271(g) (1996). Regarding the
vehicular damage, consideration of exclusion under 38 C.F.R.
§ 3.272(d) (1996) should also be addressed.
In addition, the RO should prepare an audit of the veteran’s
account which identifies that portion of the overpayment
attributable to the insurance settlement income, and that
portion attributable to the Social Security income. Further,
regarding the portion of the overpayment allocable to Social
Security income, the veteran’s initial award of improved
pension benefits was dated in March 1993; consequently, at
that time, he first received the notification of the
necessity of reporting all income, and the consequences of
the failure to report income. Thus, the RO should delineate
the amount attributable to the period from July 1992, the
effective date of the award, through March 1993, when he
actually received the award.
Finally, the request for waiver was denied on the basis of
bad faith in the creation of the debt. However, subsequent
to the Committee determination in June 1994, the United
States Court of Veterans Appeals (Court) invalidated the
definition of bad faith relied upon by the Committee in its
determination. Richards v. Brown, 9 Vet.App. 255 (1996). In
this regard, the Committee found bad faith due to the
veteran’s willful intention to seek an unfair advantage, or
neglect or refusal to fulfill some duty or contractual
obligation. The Court held that this latter clause, set
forth in the VETERANS BENEFITS ADMINISTRATION CIRCULAR 20-90-5
(Feb. 12 1990), was a more restrictive standard than the
regulatory standard set forth in 38 C.F.R. § 1.965(b)(2),
and, hence, was invalid. Id. Bad faith is limited to cases
in which there is an intent to seek an unfair advantage.
Id., at 257. The VA CIRCULAR definition, as inconsistent with
the regulation and more veteran-adverse than the regulation,
cannot be an appropriate basis for a bad faith determination.
Id., at 258.
Where the law or interpretation of a law changes during the
pendency of the appeal, the veteran he is entitled to
consideration under the version most favorable to him.
Karnas v. Derwinski, 1 Vet.App. 308 (1991). In addition,
since the veteran must be informed of the basis for the
denial of his claim, the correct standard and legal citation
must be provided to him. See Epps v. Brown, 9 Vet.App. 341
(1996); Robinette v. Brown, 8 Vet.App. 69 (1995).
Accordingly, to ensure that the VA has met its duty to assist
the claimant in developing the facts pertinent to the claim
and to ensure full compliance with due process requirements,
the case is REMANDED to the RO for the following:
1. The agency of original jurisdiction
should request that the veteran provide
evidence pertaining to his lump-sum
insurance settlement of $20,132 which
identifies that portion of the settlement
attributable to medical, legal, and other
expenses deductible from countable income,
per 38 C.F.R. § 3.271(g), as well as
38 C.F.R. § 3.272(d), if applicable.
2. The veteran should also be asked to
provide a copy of his initial Social
Security award letter, showing the date he
first received benefits and the amount
thereof.
3. Thereafter, but regardless of whether
the veteran provides additional
information, the RO should recalculate the
overpayment, in light of any information
the veteran provides regarding his income.
The RO should also order an audit of the
veteran’s improved pension account, which
shows the calculation of the overpayment,
itemizes the income sources, and
separately identifies (1) that amount of
the overpayment due to the receipt of
Social Security benefits for the period
prior to March 1993, when the veteran
first received his award of pension
benefits, (2) that amount of the
overpayment due to the receipt of
insurance settlement income, and (3) the
remaining overpayment due to Social
Security income received after March 1993.
The audit must explain the creation of the
overpayment, and not simply consist of a
“paid and due” accounting. The audit
should be placed in the claims folder, and
the veteran should be furnished a copy as
well.
2. After affording the veteran a
reasonable opportunity to respond to the
audit, the RO should review the veteran’s
claim. If bad faith is considered, the RO
must use the definition set forth in
38 C.F.R. § 1.965(b)(2) (1996).
3. If the decision remains adverse to the
veteran, he and his representative should
be furnished a supplemental statement of
the case, which provides citation to the
law and regulations on which the RO’s
determination is based, to include any law
and regulations relevant to the creation
of the debt, such as 38 C.F.R. §§ 3.271(g)
and 3.272(d), and discusses their
applicability to the appellant’s claim.
If the RO continues to find bad faith in
the creation of any part of the
overpayment, the supplemental statement of
the case must also contain the definition
of bad faith set forth in 38 C.F.R. §
1.965(b)(2) (1996), and the effect on the
waiver request of a finding of bad faith,
as provided in 38 U.S.C.A. § 5302(c) (West
1996); 38 C.F.R. §§ 1.963, 1.965 (1996).
After completion of the requested development, the veteran and
his representative should be afforded an opportunity to
respond. Thereafter, the case should be returned to the Board
for appellate consideration, if otherwise in order. While
regretting the delay involved in remanding this case, it is
felt that to proceed with a decision on the merits at this
time would not withstand Court scrutiny.
This claim must be afforded expeditious treatment by the RO.
The law requires that all claims that are remanded by the
Board of Veterans’ Appeals or by the United States Court of
Veterans Appeals for additional development or other
appropriate action must be handled in an expeditious manner.
See The Veterans’ Benefits Improvements Act of 1994, Pub. L.
No. 103-446, § 302, 108 Stat. 4645, 4658 (1994), 38 U.S.C.A.
§ 5101 (West Supp. 1997) (Historical and Statutory Notes).
In addition, VBA’s ADJUDICATION PROCEDURE MANUAL, M21-1, Part
IV, directs the ROs to provide expeditious handling of all
cases that have been remanded by the Board and the Court.
See M21-1, Part IV, paras. 8.44-8.45 and 38.02-38.03.
JEFF MARTIN
Member, Board of Veterans' Appeals
38 U.S.C.A. § 7102 (West Supp. 1997) permits a proceeding
instituted before the Board to be assigned to an individual
member of the Board for a determination. This proceeding has
been assigned to an individual member of the Board.
Under 38 U.S.C.A. § 7252 (West 1991), only a decision of the
Board of Veterans' Appeals is appealable to the United States
Court of Veterans Appeals. This remand is in the nature of a
preliminary order and does not constitute a decision of the
Board on the merits of your appeal. 38 C.F.R. § 20.1100(b)
(1996).
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